Red Flags to Watch Out for with Your Financial Planner

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Choosing a financial planner is like choosing a doctor. You want to find someone you trust, who will make your financial life healthier while helping you head off impending problems. Even after researching and vetting several options, you may feel your financial planner isn’t acting in your best interests. Here are some red flags to watch for.

Lack of transparency

Clients need to be fully informed about all aspects of their financial planner’s services. If there is a lack of transparency, you may not be able to trust your financial planner’s recommendations and may not feel confident in their decisions. Some examples of a lack of transparency include:

  • The planner does not fully disclose their fees or charges hidden fees that are not clearly outlined in the client agreement.
  • The planner recommends investments that benefit them rather than the client.
  • The planner does not disclose any potential conflicts of interest, such as receiving commissions or incentives for recommending certain products or services.
  • The planner does not provide regular reports or updates on the status of their clients’ accounts or investments.
  • The planner provides financial statements, but they are generated by the advisor instead of by the broker who tracks purchases and sales in your account. Clients should see statements from well-known companies like Charles Schwab or Wells Fargo.
Pushy sales tactics

Be wary of financial planners who use high-pressure sales tactics to persuade you to invest in specific products or services. They may be more interested in earning commissions than helping you reach your financial goals.

While it is important for your financial planner to recommend certain investment products or financial strategies, they should not manipulate you into investing in something that you are not comfortable with. A salesperson may pressure you to make decisions quickly or make you feel guilty if you don’t blindly follow their advice. Additionally, your planner may encourage you to invest more than you want or offer only products they sell instead of other options you may be more familiar with.

Guarantees

If your financial planner makes unrealistic promises or guarantees about investment returns, it may be too good to be true. While it’s natural to hope for the best possible returns on your investments, it’s important to be realistic about what you can expect. Some financial planners may be unintentionally optimistic in their projections if they’re based on past performance or have experienced unpredictable changes in market conditions.

Or there could be fraud. Bernie Madoff claimed average returns of better than 11% with very little volatility at a time when markets were moving up and down. Even Warren Buffet has down years. Watch out for advisors promising returns with no risk.

Lack of credentials or experience

Your financial planner should have the proper credentials and experience to provide financial advice. Choose a financial planner who has the necessary education, licenses, and certifications to manage your finances. You may wish to begin your research with Certified Financial Planners; to achieve this status, the planner must complete rigorous training, education, and an exam. You can also check if your planner is registered with the Securities and Exchange Commission or Financial Industry Regulatory Authority. If your financial planner doesn’t have these credentials, it’s best to think twice before trusting them with your money.

Client complaints

Do some research to see if there have been any complaints or disciplinary actions against your financial planner. While it is common for any financial professional to receive a few negative reviews or complaints, a high volume or consistent pattern of complaints should raise a red flag. You can start by checking online reviews and ratings on sites like the Better Business Bureau, Yelp, or Google. You can also check with professional associations like the Certified Financial Planner Board of Standards to see if the planner has any disciplinary actions or public complaints against them. Ultimately, the goal is to find a financial planner with a solid reputation for providing quality advice and services to their clients. Don’t hesitate to ask for referrals from trusted sources, and always take the time to speak with potential planners and ask questions before making a decision.

No one will care about your money like you will. If you find that your planner is not living up to your expectations, start by talking with them to make sure they completely understand your goals. If you haven’t created a financial plan, ask how you can achieve that with your planner’s help. However, if you are stonewalled or the advisor becomes defensive it’s time to begin looking for a new planner.

Photo by Seoyeon Choi

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